Investment Thesis
Vulcan Materials operates in an essential industry with modest 7.1% revenue growth, but exhibits concerning capital inefficiency with ROE of only 2% and ROA of 1%. The combination of dangerously tight 1.4x interest coverage, flat net income despite revenue gains, and weak free cash flow generation (3.7% margin) signals structural profitability challenges that outweigh the stability of its business model.
Strengths
- Stable revenue growth of 7.1% YoY in an essential nonmetallic minerals sector
- Strong liquidity position with current ratio of 2.59x and quick ratio of 1.89x
- Reasonable operational margins with gross margin of 24.1% and operating margin of 15.1%
Risks
- Critically low interest coverage of 1.4x leaves minimal buffer for rate increases or operational stress
- Extremely poor returns on capital: ROE of 2% and ROA of 1% indicate severe capital inefficiency
- Net income essentially flat (-0.1% YoY) despite 7.1% revenue growth signals persistent margin compression and rising cost pressures
- Weak free cash flow generation at 3.7% margin relative to revenue suggests limited cash returns to shareholders
Key Metrics to Watch
- Interest coverage ratio - critical threshold below 1.4x indicates potential covenant risk
- Net margin trend - must improve from 9.4% to justify revenue growth trajectory
- Free cash flow conversion - should exceed 5% of revenue to support debt service and growth
- Return on equity and assets - need sustained improvement above 5% ROE to justify capital structure
Financial Metrics
Revenue
1.8B
Net Income
165.5M
EPS (Diluted)
$1.26
Free Cash Flow
64.6M
Total Assets
16.7B
Cash
140.2M
Profitability Ratios
Gross Margin
24.1%
Operating Margin
15.1%
Net Margin
9.4%
ROE
2.0%
ROA
1.0%
FCF Margin
3.7%
Balance Sheet & Liquidity
Current Ratio
2.59x
Quick Ratio
1.89x
Debt/Equity
0.52x
Debt/Assets
49.2%
Interest Coverage
1.35x
Long-term Debt
4.4B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-06T16:41:12.472092 |
Data as of: 2026-03-31 |
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